Editing Free-rider problem (section)

===Non-altruistic social sanctions (common property regimes)===
Often on the foundation of game theory, experimental literature suggests that free-riding situations can be improved without any state intervention by seeking to measure the effects of various forms of social sanctions. Peer-to-peer punishment, that is, when members sanction other members that do not contribute to the common pool resource by inflicting a cost on "free-riders", is considered sufficient to establish and maintain cooperation.<ref>{{cite journal |author1=Elinor Ostrom |author2=James Walker |author3=Roy Gardner |s2cid=155015135 |author-link1=Elinor Ostrom |title=Covenants With and without a Sword: Self-Governance Is Possible |journal=[[American Political Science Review]] |date=June 1992 |volume=86 |issue=2 |pages=404–17 |doi=10.2307/1964229|jstor=1964229 }}</ref><ref>Fehr, E., & S. Gächter (2000) "Cooperation and Punishment in Public Goods Experiments"'', 90 American Economic Review'' 980.</ref>

Social actions come at a cost to the punisher, which discourages individuals from taking action to punish the free-rider. Therefore, punishers often need to be rewarded for following through with their punishment for the resource to be effectively managed. Unlike a prisoner's dilemma where the prisoners are prohibited from communicating and strategizing, people can get together to form "common property regimes" in which the group weighs the costs and benefits of rewarding individuals for sanctioning free riders.<ref name="Understanding Institutional Diversity"/> So long as the benefits of preserving the resource outweigh the cost of communication and enforcement, members often compensate punishers for sanctioning free riders.<ref name="Governing the Commons">{{cite book |last1=Ostrom |first1=Elinor |title=Governing the Commons |date=1990 |publisher=Cambridge University Press| isbn= 0521405998}}</ref> While the outcome is not [[Pareto-optimal]], as the group has the additional cost of paying for enforcement, it is often less costly than letting the resource deplete. In the limiting case, where the costs of bargaining and enforcement approach zero, the setup becomes Coasian as the solution approaches the Pareto-optimal solution.

Both punishment and regulation by the state work relatively badly under imperfect information, where people cannot observe the behavior of others.<ref>{{cite journal |last1=Kristoffel Grechenig |first1=Nicklisch |last2=Thöni |first2=C. |year=2010 |title=Punishment despite reasonable doubt – a public goods experiment with sanctions under uncertainty |ssrn=1586775 |journal=Journal of Empirical Legal Studies |volume=7 |issue=4 |pages=847–67 |doi=10.1111/j.1740-1461.2010.01197.x |s2cid=41945226 |url=https://www.alexandria.unisg.ch/71109/1/GrechenigNicklischTh%C3%B6ni2010JELS%20Punishment%20Despite%20Reasonable%20Doubt-A%20Public%20Goods%20Experiment%20with%20Sanctions%20Under%20Uncertainty.pdf |access-date=2023-01-03 |archive-date=2023-01-29 |archive-url=https://web.archive.org/web/20230129190656/https://www.alexandria.unisg.ch/71109/1/GrechenigNicklischTh%C3%B6ni2010JELS%20Punishment%20Despite%20Reasonable%20Doubt-A%20Public%20Goods%20Experiment%20with%20Sanctions%20Under%20Uncertainty.pdf |url-status=dead }}</ref>
<ref name="Governing the Commons"/> Often common property regimes which members establish through bargaining have more information about the specific common pool resource which they are managing than outsiders. For this reason, and because common property regimes can avoid the [[principal-agent problem]], the specific local knowledge within common property regimes typically enables them to outperform regulations designed by outside technical experts.<ref name="Governing the Commons"/> Nevertheless, the best performance is typically achieved when people in common property regimes consult with governments and technical experts while deciding on the rules and design of their firm, thereby combining local and technical knowledge.<ref name="Governing the Commons"/><ref name="Understanding Institutional Diversity"/>